Best checking accounts with no overdraft fees: Methodology
How did we come up with this list? We analyzed hundreds of checking accounts and selected the checking accounts that don't charge overdraft fees. We then selected our top picks based on multiple factors, such as the qualitative recommendations of our community members and the quantitative recommendations of our ranking algorithms.
How do overdrafts work?
Every financial institution deals with overdrafts differently. Some banks offer free overdraft as a service, but this is rare. Usually, either the transaction is declined, or you have to pay a fixed fee every time there are debit card purchases, check, or online transactions you don't have sufficient funds to cover. Some banks, such as the banks mentioned above, are more forgiving. Others are happy to charge $35+ for every overdraft regardless of how small the amount is.
In some cases, you can link your checking account with a savings account (or another checking account) which will automatically transfer funds if you ever have insufficient funds. This is a great service when it is free. However, some banks will charge fees that are as expensive as overdraft fees for this service.
How do you avoid overdraft fees?
Obviously, the best way to avoid overdraft fees is never to spend more than what you have in your checking account. One way to do this is to set up text messages and email alerts when your balance falls below a set amount. However, sometimes life happens. If you find yourself paying overdraft fees more than once every five years, it may be a good idea to avoid checking accounts that charge overdraft fees. The checking accounts above are a great place to start searching for the best no-overdraft-fees account for you.
However, avoiding overdraft fees does not help when it comes to a bounced check or a missed payment. The good news is there are alternatives to overdraft protection plans that don't require expensive fees.
What alternatives are there to overdraft fees?
There are multiple ways a bank can act when an account holder doesn't have enough money for a transaction. Here are four common ones:
A simple way to deal with insufficient funds is to decline transactions. The benefit of this approach is you don't get a negative balance and avoid overdraft fees. On the other hand, it can be embarrassing to have a payment declined, creditors may charge you penalty fees, and missed payments can be reported to the credit bureaus.
Some banks, such as Capital One, provide grace periods (usually 24 hours) so account holders can move money around and get their checking accounts back in order. However, note that in most cases, there is a fee if you don't get out of the read by the end of the grace period.
Transfer from a savings account
Other checking accounts can be linked to savings accounts that automatically transfer money when your checking account balance goes into the red. When available, setting this up is as easy as logging onto your account and setting up the link.
What types of overdraft protection are there?
Overdraft protections come under a different guise. If you decide to opt-in for an overdraft protection program, it's a good idea to understand the options so you can minimize the cost.
Standard overdraft treatment
The standard overdraft protection program charges a fee (usually between $10 and $35) for each transaction that requires an overdraft. Although some users value the convenience of avoiding a bounced check or payment denial, it’s usually best to avoid them and use overdraft protection alternatives instead.
Banks and credit unions that offer overdraft protection usually give you the option of connecting another checking account or a savings account to your account. If your checking account is in the red, the bank can transfer funds from the linked accounts to cover the difference. Some banks offer this service for free but, usually, there is a fee. The good news is the overdraft protection fee is lower than a regular overdraft fee.
Overdraft line of credit
In other cases, financial institutions set up a line of credit you can use when you overdraw from your checking account. This option is usually less expensive than overdraft fees because you only pay interest on the overdraft amount, which is usually small. The cost of an overdraft line of credit can be minimal as long as you repay the line of credit fast.
Are there banks with no overdraft fees?
Although it is not always easy to find a checking account with no overdraft protection fees, they do exist. The list of checking accounts above is a great place to find banks that don't charge an overdraft protection fee.
Do all banks charge overdraft fees?
No. The financial institutions listed above provide online checking accounts that either offer free overdrafts or decline all overdraft transactions if they have insufficient funds when hit with a direct deposit, bounced check, or debit card payment.
How to choose the best checking account with no overdraft fees
Finding a checking account with no overdraft fees is great, but it's not the only (or even the most important) feature to look out for when comparing checking accounts. Check for other fees, such as monthly maintenance fees, ATM fees, and wire transfers. It is also possible to find checking accounts that pay an APY, give you access to free bill pay, or even include powerful budgeting tools.
The checking accounts listed provide some of the best options available among checking accounts that don't charge an overdraft fee.